Regulating NBFCs like banks to impair lending model: FIDC to FM Sitharaman

According to the memorandum, if NBFCs are to be regulated like banks, then the typical NBFC model of lending will suffer which will have an impact lending to the unbanked/ underbanked segment

Regulating finance companies akin to banks can disrupt the traditional lending model of such entities, the Finance Industry Development Council (FIDC) told Finance Minister Nirmala Sitharaman in its pre-Budget memorandum.

If NBFCs are to be regulated like banks, the typical non-banking finance company (NBFC) model of lending will suffer, which will have an impact lending to the unbanked/underbanked segment of the society, the FIDC said.  “Flexibility” is the key that is required primarily from the borrower’s perspective, the memorandum said.

After some large systemically important NBFCs went belly up in the past few years, the Reserve Bank of India (RBI)